Koreans allowed to switch pension plans, heralds fierce competition

(Lee Seung-hwan)

South Korean workers with pension plans will be allowed to move their funds into different pension sponsors without having to cancel their existing plans. Banks with large pension balances are heavily invested in retaining clients, while securities firms and insurers are gearing up to attract more customers.

Yields will be a critical factor for workers in choosing pension providers. An analysis by Maeil Business Newspaper of the performance of retirement pension providers over the past year showed a yield gap of up to 13 percentage points, depending on the financial company.

In defined benefit (DB) plans, a type of pension plan in which an employer or sponsor promises a specified pension payment, the gap was significant, with Samsung Fire & Marine Insurance leading at 18.3 percent, followed by KB Securities Co. and Shinhan Bank. In contrast, Hana Bank and Shinhan Securities Co. had relatively lower returns.

Regional banks, securities firms, and insurance companies delivered higher short-term returns. With smaller pension reserves, the institutions are expected to ramp up their efforts to attract clients through strong returns.